Chapter 9 - Capacity Planning and Location Analysis

Capacity

The maximum output rate that can be achieved by a facility.

Capacity planning

The process of establishing the output rate that can be achieved by a facility.

Design capacity

The maximum output rate that can be achieved by a facility under ideal conditions.

Effective capacity

The maximum output rate that can be sustained under normal conditions.

Capacity utilization

Percentage measure of how well available capacity is being used.

Best operating level

The volume of output that results in the lowest average unit cost.

Economies of scale

A condition in which the average cost of a unit produced is reduced as output increases.

Capacity cushion

Additional capacity added to regular capacity requirements to provide greater flexibility.

Decision tree

Modeling tool used to evaluate independent decisions that must be made in sequence.

Location analysis

Techniques for determining location decisions.

Proximity to Sources of Supply

The need to locate close to supply sources, especially in industries like farming or mining.

Proximity to Customers

The need to locate near markets served, particularly for service firms.

Proximity to Source of Labor

The need to access a qualified labor pool, especially in labor-intensive businesses.

Community Considerations

Factors such as community acceptance, taxes, jobs, and potential resistance to pollution or noise.

Site Considerations

Includes utility costs, zoning, soil conditions, climate, and tax structure.

Quality-of-Life Issues

Factors like lifestyle, schools, crime rates, and climate that impact employee attraction and retention.

Globalization

The process of locating facilities around the world.

Factor rating

A method to evaluate multiple location alternatives based on weighted criteria.

Load–distance model

A method for evaluating location alternatives based on distance between sources and facilities.

Rectilinear distance

Shortest distance between two points using only north–south and east–west movement.

Center of Gravity Approach

A method using coordinate averages to identify a location minimizing weighted distances.

Transportation Method

A linear programming approach used for solving location allocation problems.